Global Financial Conditions: An Outlook - Jones Lang LaSalle
Global Financial Conditions: An Outlook - Jones Lang LaSalle
Global Financial Conditions: An Outlook - Jones Lang LaSalle
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<strong>Global</strong> <strong>Financial</strong> <strong>Conditions</strong>:<br />
<strong>An</strong> <strong>Outlook</strong><br />
Paul Guest<br />
Head of UK Research<br />
18 th April 2008
Defining Events of the Credit Crunch<br />
2007<br />
• Collapse of Bear Stearns Hedge Funds<br />
• Boots leveraged buy out<br />
• Money market freeze<br />
• Northern Rock<br />
• Citigroup rescue<br />
• Co-ordinated central bank bail-out<br />
2008<br />
• More bank losses, world equity markets slide, central bank rate reductions,<br />
Soc Gen, Bear Stearns buyout, US fiscal stimulus package…<br />
2
Mar08<br />
Jan08<br />
Nov07<br />
Uncertainty Plagues <strong>Financial</strong> Markets<br />
Overnight index swap rate, bps<br />
Source: BoE, Fed, ECB<br />
120<br />
3<br />
100<br />
US Euro zone UK<br />
80<br />
60<br />
40<br />
20<br />
0<br />
-20<br />
Jan06<br />
Mar06<br />
May06<br />
Jul06<br />
Sep06<br />
Nov06<br />
Jan07<br />
Mar07<br />
May07<br />
Jul07<br />
Sep07
Malaise Currently Confined to <strong>Financial</strong> Sector…<br />
12<br />
4<br />
10<br />
%<br />
Average speculative grade default<br />
rate, global corporate, %<br />
8<br />
6<br />
4<br />
2<br />
0<br />
2006<br />
2008*<br />
1970<br />
1972<br />
1974<br />
1976<br />
1978<br />
1980<br />
1982<br />
1984<br />
1986<br />
1988<br />
1990<br />
1992<br />
1994<br />
1996<br />
1998<br />
2000<br />
2002<br />
2004<br />
* Jan-Feb<br />
Source: Moody’s
…but Firms Scale-back Ambitions<br />
Bond issuance, US$bn<br />
1000<br />
900<br />
800<br />
Rest of world Emerging markets<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Q195 Q196 Q197 Q198 Q199 Q100 Q101 Q102 Q103 Q104 Q105 Q106 Q107 Q108<br />
Source: Moodys<br />
5
Forecasts Cut on US Woes<br />
Real GDP, % chg 2008<br />
7<br />
US European Union Asia Pacific World<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
2007 - Jan 2007 - June 2007 - December 2008 - March<br />
Source: Consensus Forecasts<br />
6
Themes for a Market Correction<br />
• ST risk: investment banks, insurers – the worst is not behind us<br />
• MT risk: inflation, food prices and central banks<br />
• Bad news: financial sector job losses, construction costs, securitisation and<br />
the cost of credit, real economic fallout<br />
• Good news: imbalance in supply and demand for quality assets, rapid<br />
action by public bodies, emerging markets strength<br />
7
Thank you<br />
This publication is the sole property of <strong>Jones</strong> <strong>Lang</strong> <strong>LaSalle</strong> IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of <strong>Jones</strong><br />
<strong>Lang</strong> <strong>LaSalle</strong> IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the<br />
accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. <strong>Jones</strong> <strong>Lang</strong> <strong>LaSalle</strong> does not accept any liability in negligence or otherwise for any loss or damage<br />
suffered by any party resulting from reliance on this publication.<br />
COPYRIGHT © JONES LANG LASALLE IP, INC. 2008<br />
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